PetroChina to enter Shanghai Market

China’s largest oil and gas producer, PetroChina intends to raise a whopping $9.8 billion through an initial public offering (IPO) in Shanghai. The company would adopt the “book building” route to issue as many as four billion new shares.

PetroChina was established as a joint stock company with limited liabilities under the Company Law of the People's Republic of China (the PRC) on November 5, 1999 as part of the restructuring of CNPC. PetroChina is the world's second largest energy company by market capitalization and already has a Hong Kong listing. The company did not say when it would list on the Shanghai exchange.

In a statement to the Shanghai stock exchange, the company, owned by China National Petroleum, said that discussions on pricing will start Monday and subscriptions will be taken on Thursday and Friday. Unsuccessful applicants would get refunds by October 31.

The four billion new local-currency A shares constitute 2.2 percent of its expanded share capital. The company intends to offer 70 percent of the shares to retail investors and 30 percent to institutions. Depending on the demand, the ratio may be altered.

This IPO could be the largest in China. The nation’s biggest coal producer, the China Shenhua Energy Company, currently holds the record for raising $8.9 billion in China’s domestic stock market.

PetroChina, which has big plans will allocate $5 billion for five projects to construct oil fields, upgrade technology and expand ethylene capacity. Analysts expect PetroChina to use the money from its share sale to fund expansion abroad, as supplies have been slowing at its existing domestic wells.

PetroChina's Hong Kong listed shares were trading up 0.2 percent at HK$18.96 by 0709 GMT on Monday. Larry Grace, energy analyst at Kim Eng Securities in Hong Kong said, “This is pre-pulling. There's an expectation of what the A share is going to do. Mainland Chinese money goes to large cap stocks. And the king of the oils is PetroChina."